BERLIN -- Germany's highest court on Tuesday overturned a law that let anti-terror authorities retain data on telephone calls and e-mails, saying it marked a "grave intrusion" into personal privacy rights and must be revised.

The court ruling was the latest to sharply criticize a major initiative by Chancellor Angela Merkel's government and one of the strongest steps yet defending citizen rights from post-Sept. 11 terror-fighting measures.

The ruling comes amid a Europe-wide attempt to set limits on the digital sphere in the name of protecting privacy. That includes disputes with Google Inc. over photographing citizens for its Street View maps and a vote against letting U.S. authorities see European bank transfers to track down terror cells.

The Federal Constitutional Court ruled that the law violated Germans' constitutional right to private correspondence and failed to balance privacy rights against the need to provide security. It did not, however, rule out data retention in principle.

The law had ordered that all data -- except content -- from phone calls and e-mail exchanges be retained for six months for possible use by criminal authorities, who could probe who contacted whom, from where and for how long.

"The disputed instructions neither provided a sufficient level of data security, nor sufficiently limited the possible uses of the data," the court said, adding that "such retention represents an especially grave intrusion."

The court said the fact that citizens did not notice the data was being retained caused "a vague and threatening sense of being watched."

Germans are sensitive to privacy issues, based on their experiences under the Nazis as well as in the former East Germany's communist dictatorship.

The court ruled telecom data must not be stored in Germany before there is a new law, and existing data must be erased.

Marc Rotenberg, executive director of the Washington-based Electronic Privacy Information Center, called the ruling a "fairly narrow but very important decision" that will primarily affect Europe.

He likened data retention to Europe's version of the Patriot Act, the U.S. law that gives authorities more investigative powers to combat terrorism. And there is "clearly a rising tide" against it in Europe, he added.

The ruling highlights tensions between the U.S. and Europe when it comes to privacy standards, said Eddan Katz, international affairs director at the Electronic Frontier Foundation. And it could to lead to the U.S. being unable to let similar legislation pass, he said, given that "this was an experiment that was tried and as a matter of constitutional law rejected."

Other EU member states implementing the EU-wide directive have ordered even longer storage.

Britain requires Internet service providers to store records of Web and e-mail traffic -- though not their content -- for a year, but a government proposal there to set up a vast central database of phone and Internet traffic met with strong opposition and was dropped.

The Netherlands also set 12 months for most data storage in a contentious decision, prompting the Dutch digital rights group Bits of Freedom to applaud the German ruling.

"This is a groundbreaking ruling with big consequences for the Netherlands, where the same mistakes have been made as in Germany only to a larger degree," said spokesman Axel Arnbak. "This ruling goes to show: protest pays."

In Sweden, where the EU directive has yet to be implemented, Justice Minister Beatrice Ask was quoted as saying the German ruling showed "that we have been right in that that it concerns sensitive issues that demand very difficult judgments."

In Spain, telecom companies also have to retain data for whole year, but police are required to have a court order to access the data.

That condition seems to have been enough to prevent any significant protests in a country with a long history of fighting violent Basque separatism and more recently, Islamic terror groups, said Ruben Sanchez, spokesman for the consumer rights federation called FACUA.

The decision in Germany, Sanchez said, "might serve as a wake-up call for governments not to overdo things."